【IMI Working Paper No. 2211 [EN]】Government Intervention through Informed Trading in Financial Markets
2022-06-20 IMI【Abstract】
We develop a theoretical model of government intervention in which a government with
private information trades strategically with other market participants to achieve its policy
goal of stabilizing asset prices. When the government has precise information and pri
oritizes its policy goal, both the government and the informed insider engage in reversed
trading strategies, but they trade against each other. Government intervention can improve
both market liquidity and price efficiency, and the effectiveness of government interven
tion depends crucially on the quality of information possessed by the government.
【Keywords】
Government intervention,
Trading,
Price stability,
Price effiffifficiency
【Authors】
Huang Shao'an, Center for Economic Research, Shandong University
Qiu Zhigang, Research Fellow of IMI, School of Finance, Renmin University of China
Wang Gaowang, Center for Economic Research, Shandong University
Wang Xiaodan, Center for Economic Research, Shandong University
